Hi every one !
I'm new in cryptocurrency, I'm trying to understand it but there still one thing I didn't understand about wallets!
At first , I know there is cold and worm wallet.
The cold is a hardware that store coins in it
And the warm is a software or a site on internet that store coins on internet or in the laptop or mobile ( is what I already know right ?)
But what I'm trying to know about soft wallets like Bitpay, Enjin or BitCoin Core wallets , do they store bitcoins on the device or on internet ?
So if l have bitcoins in my mobile wallet and the mobile drop in water and gone!, did the coins gone too or I can get them back in a new mobile by the recovery key?
And I'm sorry for my weak English
Hi,
I will try to answer this question as simple as possible.
First of All, think a Bitcoin Wallet just as a pocket where you have your coins or bills.
A Bitcoin Wallet is just a collection of bitcoin addresses, so a place where you store your coins and bills, (in Bitcoins your coins, where the smallest unit is called Satoshi - 1 BTC = 100,000,000 Satoshis, and you have different units, just like you have different coins and bills in real life).
So as soon you have the coins and bills in your pocket, they "belong" to you and you can spend them as long as you have the pocket with you. You will get often change in return.
The scenario is very similar in bitcoin but more technical with few differences. Also the cryptography comes here into the game.
In your Bitcoin Wallet, you have Bitcoin Addresses. These addresses are made of 26 to 35 aplhanumeric characters, beginning either with the number 1 or 3 and generated by the software (Wallet) you are using.
The Bitcoin Protocol being based on asymmetric cryptography,
each bitcoin address consists of a Public key and a Private key.Public key allows you to hand people a public key and use the corresponding private key to prove the ownership.
Applied to Bitcoin, a Public Address is just a shorthand notation for a public key. So when someone makes a transaction, let's say I'm sending from my wallet (from Address X) to your provided BTC Address, I potentially give you the right to spend the money as long as you have the private key of this address.
To spend your Bitcoins, you basically give out the ownership of one your addresses to someone else (this process of exchanging keys is done automatically by the wallet you are using).
Now there are different types of Wallets: generally Cold Wallet, Hot Wallet and mix of both, these all could be Hardware or Software. There are many sub-types like mobile wallet, Paper wallet etc.
Simply said, with a Cold Wallet, you have your private keys in your hands.
In a Hot Wallet, a third party is controlling/holding your private keys on their servers, meanly if they are hacked.... you are hacked too most probably...
Only when you have the private keys in your hands, you will have FULL CONTROL of your coins.
But regardless of which wallet you are using, you can still spend funds, as long as you have access on it.
Now let's say you are using Paper Wallet (Cold), which is very secure because only you has the key. You just need to loose this paper and you will have lost forever your coins...
Let's transfer this to the real world:
Hot wallets are like checking accounts while cold wallets are very similar to saving accounts.
In a Checking Account you can spend very fast your money, while to retrieve funds from a saving accounts, the procedure might be longer. But still you can spend from both accounts right?
At the end of the day, you will have to decide if you want to go for Hot Wallets or Cold Wallets.
Both have advantages and inconvenient. What would be for me an advantage, might not be necessary for you.
It's important to understand the concept Public/Private key, so that you can easily export your coins to other wallets (wherever your private keys are provided to you).
I hope this could help you a little bit to start over. There are many Experts here, who will surely give better Explanation
